Former
Deutsche Bank Singapore
head
Bryan Yap
was sceptical when, in November 2010,
NewSat
boss
Adrian Ballintine
said he wanted to raise $US400 million (from a market capitalisation of $50 million) to launch Australia’s first commercial satellite.

Over breakfast at Singapore’s Shangri-La Hotel, Yap’s first impressions was that Ballintine was at best overly ambitious, and at worst a bullshit artist. But Yap had a keen interest in space assets so agreed to keep in touch. After the meeting, Yap added two thoughts to his notebook: “May be one of the most interesting deals we’ve ever done", and “What is Adrian Ballintine smoking?"

Ballintine put in a call to his old contact
Andrew Suzman
at
Capital Group
. The PE firm had been founding investors in Newsat, selling out when the company floated on the ASX in 1999. Suzman said he would think about it.

Then Ballintine approached former Prime Minister
Bob Hawke
. He told him an Australian-owned satellite would be in the national interest and Hawke became a consultant, making introductions to policy-makers, including federal communications minister
Stephen Conroy
. Assembling the project in an uncertain regulatory environment was tough. Australia released its first piece of satellite policy only this month.

AFR
AFR

Lazard
’s
John Stewart
joined the project as lead adviser, bringing a decade of experience raising money for risky start-ups in Silicon Valley.

The right stuff

By March 2011, Yap believed if Ballintine’s enthusiasm could be tempered and the right investors found, the plan just might work. Ballintine went to the US to meet venture capitalists but Yap convinced him it would be better to let him help NewSat approach directly entrepreneurs in Singapore. Yap’s family investments and advisory firm Daun Consulting became the cornerstone investors and began seeking co-investors, most notably Singaporean billionaire property mogul
Ching Chiat Kwong
, also known as “Mr Ching".

Newsat was on its way, but would have to lock in agreements with suppliers, get the project insured and secure more contracts before institutional investors would even consider it.

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Company Profile

In late 2011 James Murray, who leads
Morgan Stanley
’s satellite banking group in New York came on as lead banker. Specialist space procurement and risk advisers were also appointed.

NewSat scored a major coup in December 2011 when
Lockheed Martin Space Systems
president of commercial ventures
Linda Reiners
agreed to authorise production on the first satellite, Jabiru-1, on a tab. It was lucky timing, with the United States retreating from Iraq and Afghanistan, the military industrial complex needed commercial contracts. French manufacturer
Arianespace
would build the rocket. NewSat planned to launch five satellites over the next eight years.

In July 2012 NewSat got approval for US$280 million in debt funding from US export credit agency Ex-Im Bank and a US$102.74 million debt facility guarantee from its French counterpart
COFACE
.
Standard Chartered Bank
also provided a $US25 million facility.

Ballintine had hoped this progress would boost Newsat’s share price and allow it to raise the remaining $200 million through an equity capital-raising. But the market was indifferent. The company executives and their advisers went back to Ex-Im, COFACE and Standard Charted to renegotiate the terms of the debt financing to reduce the size of the capital-raising.

On November 29 the company entered a trading halt to buy more time. A voluntary suspension followed, which dragged on for three months. Market rumours spread that the company had over-reached.

Then came a huge blow. Advisers Lazard and Morgan Stanley walked away. The deal looked set to collapse.

Lazard’s Stewart, however, still believed he could pull the funding together. His boss, John Wylie, dis­agreed. Amid a wider management shake-up Stewart left in late November. Ballintine rang Wylie and within hours they met for the first time at NewSat’s Melbourne office. Wylie agreed Stewart could continue working on the deal as an independent adviser without incurring a break fee. By Christmas, Stewart had a new job at
Gresham Partners
.

Morgan Stanley’s Murray thought the best way to fund the shortfall would be to bring in a private equity firm or other major investor. He made a number of introductions, but Ballintine was determined to push ahead with a capital-raising. Morgan Stanley also waived its break fee.

Melbourne-based
Credit Suisse
director of equity capital markets
Adam Lennen
took over. He inherited the last stages of the difficult debt restructure. In the Washington headquarters of lawyers
Pillsbury Winthrop Shaw Pittman
, Ballintine was losing patience and demanded the assembled advisers explain what was taking so long. This infuriated lead legal counsel, head of the firm’s communications practice and satellite law specialist
John Hane
, who had never seen a new entrant to the business advance so far so fast. Hane had tried and failed to launch a satellite in the 1990s.

New debt deal

Back in Melbourne, the pressure was on to keep the ASX satisfied an ongoing trading halt suited shareholders.

In late February a new debt deal with the export credit agencies was finalised. More debt was provided and upfront fees had been delayed. NewSat now needed just $105 million and launched a bookbuild at 40¢ per share (a 25 per cent discount) on February 21.

Mr Ching bought $15.4 million worth of shares and Yap upped Daun’s stake to $11.6 million from his own money, as well as bringing in a handful of smaller investors drawn from family and friends.
Capital Group
bought 19.1 million shares to become a major investor holding 5.1 per cent of the company.

Four days later, the equity-raising was complete. When trading resumed, the share price dropped 14.42 per cent and has continued to decline, closing at 39.5¢ on Friday. The market still has its doubts about the project.

Nevertheless, the fund-raising itself was a major achievement. In March a who’s who of the satellite industry was in Washington DC for a major conference. Australia’s ambassador to the US
Kim Beazley
hosted a special dinner for 80 at the Hay-Adams Hotel to toast NewSat’s success.